While August’s full sales data won’t be clear for another couple of weeks, Black Box Intelligence has seen weekly results in line with the Association’s concern.
Despite 22 weeks of stronger sales growth compared to the same stretch in 2019, performance has begun to soften. In the period ending August 15, the industry posted its weakest figures in the last nine weeks, Black Box said. Traffic growth also slid. Forty-two states averaged lower sales growth during the first weeks of August compared to the length of July.
Data from Lisa Miller, a consumer insights and innovation strategist, found, out of a group of 1,000 American consumers polled, 51 percent were “very/extremely concerned” about the Delta variant in July. And 59 percent said the impact of the Delta variant would somewhat or significantly reduce their activities.
By August 16 (compared to July 26), consumer positive sentiment had dropped 58 percent among the "first-out-the-door" group of already wary guests. Seventy-one percent said they were somewhat/significantly reducing activities due to COVID, and 31 percent even said we should consider shutting back down to curb spread. This time last year, the number was 33 percent.
Also, there’s the question of how this all affects an already stretched labor pool, which is directly playing into the dine-out equation for guests. In July, Miller’s data revealed 43 percent of consumers were frustrated with not enough staff during a recent restaurant visit.
And this as restaurant menu prices hiked 0.8 percent on a month-to-month basis in July, according to the Bureau of Labor Statistics—the largest monthly increase since February 1981. Full-service restaurant prices upped 4.3 percent, while limited-service saw price hikes of 6.6 percent. Restaurant prices rose in June as well, up 0.7 percent month-to-month and 4.2 percent on an annual basis.
Red Robin, in one case study of late, had to reduce hours of operation at some stores in Q2, hampering its sales recovery. The chain has added 1,900 employees since late May but remains 2,000 short of its goal to best 2019 staffing levels. This equates to about five employees per restaurant, or roughly an employee short per location across the system. Red Robin also forked up $1.6 million in incremental labor costs in Q2 due to increased onboarding, as well as retention and sign-on bonuses to lure candidates.
Clearly, it's one visible lever for why prices are climbing industry-wide. At the end of Q2, hourly wage increases were in the mid-single digits at Red Robin, partially offset by a favorable lift in front-of-house hours. Full pricing in 2021 for the chain is expected to be between 3.5 percent and 4 percent.
An example of the commodity inflation—Texas Roadhouse said in July it expects food cost inflation of 7 percent in the near future, up from a previous guidance of 4 percent laid out in April. As other chains lamented in recent months, Texas Roadhouse has had to buy more product on the open market and outside the cost parameters of its original contracts to counter issues.
This has pushed the cost of basket items, like beef, upward. At this time last year, chicken cost about $1.13 per pound. Since April, prices have climbed above $1.80 per pound, according to The Associated Press.
And will all of these issues, namely around vaccines, make it even more difficult to hire employees?
According to a study of more than 1,600 employers from Littler Mendelson, the world’s largest employment law firm, fewer employers in retail and hospitality (9 percent) are requiring vaccines or planning to, compared to 21 percent of all respondents. When asked about their concerns with mandating vaccines, employers in these industries expressed greater concern across several areas:
- 80 percent (retail/hospitality) picked resistance from employees who are not in a protected category but refuse to be vaccinated (compared to 75 percent of all respondents)
- 73 percent cited the impact on company culture and employee morale (compared to 68 percent of all respondents)
- 69 percent noted loss of staff and difficulty operating (compared to 60 percent of all respondents)
Broadly, there’s a question of whether or not restaurants ever get back to previous staffing levels, and if adjustments such as automation, QR codes, smaller dining rooms, cross-training, or additional shifts in the labor model are here to stay.